Assar Lindbeck. The Welfare State. Aldershot, England: Edward Elgar. 1993. $62.95 hardcover

D\u27Souza, Henry J.

English

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The Journal of Sociology & Social Welfare Volume 21 Issue 3 September Article 15 September 1994 Review of The Welfare State. Assar Lindbeck. Reviewed by Henry J. D'Souza, University of Nebraska at Omaha Henry J. D'Souza University of Nebraska, Omaha Follow this and additional works at: https://scholarworks.wmich.edu/jssw  Part of the Social Work Commons Recommended Citation D'Souza, Henry J. (1994) "Review of The Welfare State. Assar Lindbeck. Reviewed by Henry J. D'Souza, University of Nebraska at Omaha," The Journal of Sociology & Social Welfare: Vol. 21 : Iss. 3 , Article 15. Available at: https://scholarworks.wmich.edu/jssw/vol21/iss3/15 This Book Review is brought to you by the Western Michigan University School of Social Work. For more information, please contact wmu-scholarworks@wmich.edu. Book ReviewsNicholas Barr. The Economics of the Welfare State. Stanford, CA:Stanford University Press, 1993. $59.50 Hardcover, $18.95papercover.Assar Lindbeck. The Welfare State. Aldershot, England: EdwardElgar. 1993. $62.95 hardcover.Nicholas Barr maintains that economic theory explains thewelfare state better than any ideologies. While libertarians seethe development of the welfare state as an encroachment of in-dividual liberties; liberals see it as a quest for social justice. So-cialists view it as a capitalist conspiracy to contain social unrest.For Barr, however, all countries, irrespective of their dominantideology, have developed similar industrial structures (theoryof convergence) and some form of welfare state. Thus, the wel-fare state develops as a response to the logic of industrialism.If ideology plays any role at all, it is in the model of the wel-fare state, namely, the residual (as in the U.S.) or institutional (asin North-western Europe). Although Barr endorses technologi-cal determinism, he is not ideologically neutral. He prefers theliberal ideology since its utilitarian approach seeks to maximizetotal welfare without dogmatic adherence to a method-privatemarkets, public production, or both.The distinction between aims and methods of policy arefundamental to Barr since the aims of policy (equity/justice,efficiency, individual freedom) are normative and are influencedby ideology. Once the aims are laid out, the method of achievingthem is a technical matter left to the managerial technocrat.With this framework Barr discusses economic theories ofstate intervention and insurance, and presents certain assump-tions in which markets operate efficiently. These are: (1) perfectinformation on products and prices for consumers and firms;(2) perfect competition; and (3) no market failures on accountof provision of public goods, external effects (e.g., air pollution)and increasing returns of scale (leads of monopoly and elimi-nation of smaller firms).222 Journal of Sociology & Social WelfareWhen these assumptions fail, state intervention in the formof regulation, finance, or public production, is justified toachieve efficiency. Barr also proposes that social justice aims canbe achieved by income transfers unless in-kind (free education,health care, child care) transfers are more efficient. Illustratingthese propositions with the United Kingdom as an example,he provides a detailed analysis of the cash and in-kind bene-fits there.The social insurance programs of the welfare state seek toprovide security to people in the form of unemployment, sick-ness, and disability, and retirement benefits. Since the marketcannot insure against unemployment and inflation, these arejustified for the public on the grounds of efficiency. In otherwords, the risks for the private markets are too high and prof-its cannot be made. Perhaps the same reasoning could justifypublic provision of automobile or home owners' insurance.Barr's analysis of health care is timely for the United States.He favors the National Health Service of the United Kingdomon the grounds of efficiency and social justice, but endorsesthe Canadian and the Health Maintenance Organization (HMO)models as possible alternatives. He does not favor education tobe left to the private market on grounds of efficiency. Regard-ing housing, he recommends the replacement of price subsidies(rent control, loan finance, mortgage interest tax exemption) tobe replaced by income subsidies to those in need since pricesubsidies lead to inefficiency.Barr struggles with the dilemma of the welfare state itself-how to achieve equality without lost incentive. For him, "Toavoid the disadvantages of capitalism by abandoning the mar-ket system entirely is to throw the baby with the bath water."(p.434). He advocated taxing transmission of wealth (death du-ties, inheritance taxes) and profit-sharing with workers to givethem a small stake in the capitalist system.Lindbeck attempts to resolve this same dilemma in his es-says. As an academic economist and advisor to the governmentof Sweden, the most advanced welfare state in the industrializedworld, Lindbeck is concerned about the expansion of the welfarestate into a free-for-all redistribution state-"transfer state." Suchredistribution takes place from the middle class to the middleBook Reviews 223class itself or "from the right to the left pocket." Lindbeck fearsthat this situation will produce serious problems for the long-term viability of the welfare state, for example: 1) a disincentiveproblem causing what he calls "substitution effects" and "deadweight costs"; 2) weakening of the family, 3) tension betweenthe individual and the state; and 4) the loss of pluralism.Lindbeck does not advocate a complete roll back of thewelfare state. Emphasizing its achievements, he characterizes"the modem welfare state as a triumph for modern civiliza-tion." It has eliminated destitution (at least in North-westernEurope), improved the economic security of ordinary people,increased national economic productivity by increasing invest-ment in human capital by providing free education, health care,and child care.The remaining challenge is "how to restore efficient incen-tives to productive activity without jeopardizing the socialachievements of the modern welfare state." (p. 95). The ef-fects resulting from high marginal tax rates are that peoplechoose leisure over work, pursue do-it-yourself work, producefor barter, and cheat on taxes since honesty is expensive. Lind-beck laments that the provision of personal services to familymembers is nationalized in advanced welfare states. What he ig-nores, however, is this benefit liberates women from unwageddomestic servitude. It may eventually set right a global injus-tice to women who do two thirds of the world's work and geta tenth of the income and own one percent of the property.Lindbeck overlooks the fact that "cheating on taxes" is notonly characteristic of advanced welfare states. In a free marketsystem, consider the following: transfer pricing techniques ofmultinationals, tax loopholing by bribing (campaign contribu-tions) legislatures, setting up subsidiaries in tax-haven of-shoreisland countries, stashing away money in Swiss Bank accounts,money laundering by multinational banks, Savings and Loanscandals in the U. S., and Pentagon capitalism.Lindbeck wants public spending in the welfare state to beless than 50% of the GNP. This would restrict the role of thewelfare state to its percentage of the 1960s. In this form, the wel-fare state would focus on providing social security, eliminatingpoverty, and providing basic social services such as education224 Journal of Sociology & Social Welfareand health. Some of his reforms are: tax reform, privatizingmany public sector services, and keeping the social security sys-tem compulsory but making it actuarial and benefits relating tocontributions, a voucher system for redistributional goals, andtaxing consumption.Lindbeck claims that the competitive and decentralizedmarket system and pluralism go together. He favors state in-tervention to reverse the tendencies for merger, emergence ofconglomerates and development of interlocking directories inthe corporate sector; in other words, he wants the state to bringback competitive capitalism.What both Barr and Lindbeck overlook is that privatemarkets and capitalism are not designed to distribute incomesevenly. In fact, the advanced welfare states are facing a crisis to-day because of attempting to function in a contradictory globalcapitalist system. Capital has no commitments to any nationstates. Its favorite working class is that one which gives it themaximum surplus value. It would be very hard for any nationstate to compete in a global market place using third worldworkers paid poverty level wages. This contradiction even so-cialist regimes have to face. Reforms recommended by the bothBarr and Lindbeck may only postpone this crisis. Students ofthe welfare state, policy makers and administrators will findthese books, thought-provoking and informative.Henry J. D'SouzaUniversity of Nebraska at OmahaAlan C. Kerckhoff. Diverging Pathways: Social Structure and CareerDeflections. Cambridge University Press, 1993. $49.95 hard-cover.For those enamored of the idea that we are makers of ourown futures, Diverging Pathways should be must reading. Ker-ckhoff's most recent study of stratification in Great Britain an-alyzes the effects of structural "placements" in schools and thelabor market. An exemplar of the new genre of status attainmentstudies which accord socialization and allocation processescoequal standing, Diverging Pathways takes social structureseriously.

Review of \u3cem\u3eThe Welfare State.\u3c/em\u3e Assar Lindbeck. Reviewed by Henry J. D\u27Souza, University of Nebraska at Omaha

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Review of \u3cem\u3eThe Welfare State.\u3c/em\u3e Assar Lindbeck. Reviewed by Henry J. D\u27Souza, University of Nebraska at Omaha

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